iQIYI(US:IQ) Zhao Yin Guo Ji·2025-01-17 01:50Investment Rating - The report maintains a "BUY" rating for iQIYI, indicating a potential return of over 15% over the next 12 months [1][18]. Core Views - iQIYI's total revenue for 4Q24E is expected to decline by 14% YoY to RMB6.6 billion, primarily due to a light content slate and a decrease in barter transaction revenue [1]. - Non-GAAP operating profit is forecasted to grow by 7% QoQ to RMB395 million in 4Q24E, attributed to stringent content cost control [1]. - The target price has been lowered to US$3.00 based on a 12x FY25E PE, reflecting a more conservative outlook on future revenue and earnings recovery due to intense competition in the online video sector [1][10]. Financial Performance Summary - Revenue projections for FY24E, FY25E, and FY26E have been trimmed by 7-10% [1]. - For FY24E, total revenue is expected to be RMB29.2 billion, with a gross profit of RMB7.2 billion and an operating profit of RMB1.8 billion [8]. - The adjusted net profit for FY24E is forecasted at RMB1.5 billion, with an adjusted EPS of RMB1.6 [8]. Revenue Breakdown - Membership revenue is estimated to decline by 15% YoY to RMB4.1 billion in 4Q24E, while online advertising revenue is expected to decrease by 13% YoY but grow by 7% QoQ to RMB1.4 billion [7]. - Content distribution revenue is projected to drop by 20% YoY to RMB404 million in 4Q24E [7]. Margin Analysis - Gross margin is expected to improve by 2 percentage points QoQ to 24.0% in 4Q24E, driven by fewer barter transactions and effective cost control [7]. - Non-GAAP operating margin is anticipated to expand by 0.9 percentage points QoQ to 6.0% in 4Q24E [7]. Market Position and Valuation - iQIYI's current valuation of 8x FY25E PE offers a significant safety margin compared to peers' average of 23x [7]. - The report highlights the competitive landscape in China's video streaming sector, which is expected to remain intense [1][10].